China says it is on a fast track to liberalizing its tightly controlled and state-dominated banking system, according to statements by Chinese central bank authorities earlier this year. The push to approve privately owned banks, widely viewed as a logical next step in China’s economic reform efforts, seems to be developing more quickly than expected. But at the end of the day, China’s banks, private or state, will still be part and parcel of a doomed global central banking system hopelessly addicted to ballooning debt and paper money.

This audio clip from Henry Hazlitt's The Failure of the New Economics, starts with a Keynes quote on interest rates, and then Hazlitt corrects, as it goes in line-by-line fashion "unpacking fallacies" that oft share a common thread with the staccato of others found riddling the General Theory. In under 10 minutes it ends with Patrick Barrington's sarcastic poem "I Want to be a Consumer," published in a 1934 issue of Punch, mocking the prevailing economic thought of the time that would come to sweep away governments with the promise of miraculousity of magical money from nowhere.

WealthCycles readers may know we have frequently referred to fractional reserve banking, and the global monetary system, for that matter as Ponzi or pyramid schemes. The term “Ponzi scheme” is frequently in the headlines, in a local news item in which some local sharpie has bilked senior citizens or his drinking buddies out of a few grand, or in nationally notorious scandals such as Bernie Madoff’s fraudulent operation and subsequent conviction. But what or who is a “Ponzi,” and how did these nefarious schemes get such a funny name?

Once virtually abandoned by the mainstream, many ideas associated with Austrian School economics have been increasingly in the spotlight, and in the public consciousness, in recent years. Some of the attention resulted from the popularity of Congressman Ron Paul, who, particularly during his third presidential run in 2012, captured the attention of the millennials, the last generation born in the 20th century.

The appeal of Paul’s anti-establishment economic theories is understandable: raised on expectations of upward mobility instilled in their baby boom parents, today’s young people have emerged into adulthood to face the sad reality that their prospects aren’t as good as their parents’ were, and furthermore, may never be. It is a turbulent, uncertain era that is prompting many to examine what they’ve been taught to believe about what creates prosperity and how economies function. Even if Main Street remains unfamiliar with the terms “Austrian economics” or “Keynesian economics,” its citizens can plainly see that the status quo isn’t all it’s cracked up to be and conclude that different solutions are needed.

The fallacy that inflation is beneficial has gained great traction in recent years. The generation of working, saving U.S. taxpayers that lived through the runaway inflation of the 1970s came out of it convinced that inflation must be stomped out at all costs. But it turned out zero inflation wasn’t so great for the sectors of society with the most the economic and political power—government and political leaders, financial institutions and the banking system. So a process of re-education of the public began, with central bankers and politicians explaining that a certain level of inflation was necessary to create jobs and allow the economy to grow, and mainstream media obligingly echoing the conventional wisdom.

From that highly effective propaganda campaign emerged what is now widely accepted as economic dogma, that a slow, steady rise in inflation at some pre-determined rate is the optimal condition for healthy economic growth.

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